Sources: Sethaput front-runner to be Bank of Thailand governor

With the current central bank governor Veerathai Santiprabhob due to retire at the end of September, the government has for months been screening candidates and reaching out for recommendations for a qualified candidate to fill the vacancy.

The field was narrowed to six candidates earlier this week (read more here) drawing from a list of bureaucrats and candidates both from inside the Bank of Thailand and from the private sector.

Sources inside the cabinet and the ruling party suggests, however, that Sethaput Suthiwart-Narueput is the front runner for the position and it is his to lose.

Multiple sources told Thai Enquirer that Sethaput was ideal because he has served both as leaders of private companies and was familiar with the Bank of Thailand.

Sethaput currently serves as the director of Osotspa Co. Ltd, PTTEP and on the Monetary Policy Committee of the BOT.

The Yale and Swarthmore gradudate has also served as the senior vice president at the Stock Exchange of Thailand, in various capacities at the Siam Commercial Bank, and was a senior economist at the World Bank in Washington DC.

If appointed, Sethaput will face numerous challenges including a strong baht, a weak economy and a devastating recession as a consequence of the coronavirus lockdown.

BOT to come up with measure to mitigate the inflow of greenbacks via gold trading

The discussion to allow the use of the US dollar for gold transactions instead of the baht is currently underway, the Bank of Thailand (BOT) said on Tuesday.

Veerathai Santiprabhob, BOT’s outgoing governor, said that the central bank is in discussion with financial institutions, large gold sellers, online gold traders, and Thailand Futures Exchange (TFEX) on the possibility.

The aim is to lower exchange rate volatility and the measure is expected to come into effect within this year, the bank said.

“At a time of poor market liquidity, the baht could be volatile which means that the BOT will have to closely mitigate the situation,” he said.

According to the edited minutes of the Monetary Policy Committee’s meeting on June 24, the committee has expressed “concerns” over ways a strong baht could hamper economic recovery.

Tim Leelahaphan, a Thailand economist at Standard Chartered Bank, told Thai Enquirer that the correlation between the increasing demand for gold and the strengthening of the baht has existed for many years now.

“If gold is expensive, the baht will be strong,” he said.

Tim said the BOT has been trying to break this correlation since last year when they said gold traders can now use other currencies instead of using baht only.

However, that was rendered ineffective especially when the outbreak of the coronavirus led to the surge in demand for gold during the first half of 2020.

“What they are saying today is that the transaction will only be done in US dollar for this year,” he said. “But in the end, every trader would still want to buy the baht back.”

Tim said the measure could reduce the inflow of US dollar from gold transaction and slowdown the strengthening of the Thai baht.

Other key takeaways from BOT’s analyst meeting

  • The central bank is currently in discussion with the Thai Credit Guarantee Corporation for the latter to provide more loan guarantees for SMEs that are experiencing a shortage of liquidity.
  • The discussion on the possibility of further reducing commercial banks’ contribution to the Financial Institutions Development Fund (FIDF). The BOT already lowered the rate in April from 0.46 per cent to 0.23 per cent per annum for 2 years to allow commercial banks to lower their interest rates in bid to provide more loan to SMEs.
  • The central bank is recommending for the government to come up with measures to control supplies amid the slowdown of global demand and job creation projects for the unemployed.
  • The BOT said there is no need for additional quantitative easing measures as there is an ample level liquidity within the financial system right now.  

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